CEA Stakeholder Rights & Responsibilities 5 — Questions and Answers
Question 1: A city government is a stakeholder in a private company's decision to relocate. The government's primary interest as a stakeholder is:
- Gaining equity ownership in the company
- Protecting local employment, tax revenue, and community welfare (Correct answer)
- Controlling the company's strategic decisions
- Ensuring the company's profitability
Correct answer: Protecting local employment, tax revenue, and community welfare
Local governments act as stakeholders to protect the economic and social interests of the communities they represent, not to gain ownership or control.
Question 2: Ethical obligations to customers under the CEA framework include all of the following EXCEPT:
- Providing accurate product information
- Ensuring product safety
- Guaranteeing customer profitability on purchases (Correct answer)
- Honoring warranty commitments
Correct answer: Guaranteeing customer profitability on purchases
Companies owe customers accuracy, safety, and contract fulfillment — but cannot ethically guarantee profitability on purchases, which involves market risk.
Question 3: A company's responsibility to minority shareholders includes protecting them from:
- All investment losses
- Oppressive actions by majority shareholders that disregard minority interests (Correct answer)
- Fluctuations in the company's stock price
- Competition from other companies in the sector
Correct answer: Oppressive actions by majority shareholders that disregard minority interests
Minority shareholder protections guard against majority shareholder actions that unfairly exploit or ignore the legitimate interests of minority owners.
Question 4: Which action demonstrates a company's responsibility to the broader society as a stakeholder?
- Lobbying exclusively for self-favorable regulation
- Contributing to public goods and minimizing negative externalities (Correct answer)
- Maximizing employment to meet social goals regardless of efficiency
- Distributing profits only to local community members
Correct answer: Contributing to public goods and minimizing negative externalities
Responsibility to society means contributing positively through taxes, public goods, and minimizing harms like pollution and social disruption.
Question 5: A director who learns of a material related-party transaction must disclose it to the board primarily because of which stakeholder duty?
- Duty of care to employees
- Duty of loyalty to the corporation and its stakeholders (Correct answer)
- Duty to regulators above all other duties
- Duty to maintain share price stability
Correct answer: Duty of loyalty to the corporation and its stakeholders
The duty of loyalty requires directors to disclose conflicts of interest so the board and stakeholders can make decisions free from undisclosed self-dealing.
Question 6: Which of the following best illustrates the stakeholder responsibility of reciprocity?
- A company donates to charity after achieving record profits
- A company and its employees mutually invest in each other's long-term well-being (Correct answer)
- A company matches competitor wages to attract talent
- A company returns excess inventory to suppliers
Correct answer: A company and its employees mutually invest in each other's long-term well-being
Reciprocity in stakeholder relationships involves mutual obligations — both parties investing in the relationship's long-term health, not transactional exchanges.
Question 7: When competing stakeholder interests cannot all be fully satisfied, the ethical approach is to:
- Always default to the interest of the largest financial stakeholder
- Prioritize interests that protect fundamental rights and minimize serious harm first (Correct answer)
- Resolve the conflict through a lottery or random selection process
- Delay action indefinitely until consensus is reached
Correct answer: Prioritize interests that protect fundamental rights and minimize serious harm first
Ethical priority-setting in stakeholder conflicts places fundamental rights and serious harm prevention above less urgent competing interests.
CEA Stakeholder Rights & Responsibilities 5
A city government is a stakeholder in a private company's decision to relocate.
The government's primary interest as a stakeholder is: